Global Stocks Tumble, Crude Oil Prices Skyrocket Amid Strikes on Storage Tanks

Key Takeaways

• European stocks fell Monday and US futures pointed to a lower open, following declines in Asia, as oil prices continued their rally.
• Oil prices spiked to nearly USD 120 per barrel before slightly paring gains, after major regional producers cut energy production.
• US President Donald Trump said Sunday that higher oil prices were a “very small price to pay” for the destruction of Iran’s nuclear capabilities.

European stocks declined sharply at Monday’s open as energy prices showed no signs of halting their rally, amid production cuts and an exchange of strikes on oil storage facilities throughout the Middle East.

The Morningstar Europe Index slumped 1.9% on Monday morning, which, on top of the prior week’s decline, put European equities’ losses at more than 7% since the start of the Iran war. Stocks in energy-sensitive sectors led declines, with steel firm Voestalpine VOE down 10%, ArcelorMittal MT down 8% and ThyssenKrupp TKA down 6%. Oil producers were among the standout performers, led by Equinor EQNR, up 3%.

“Global equity markets have been dealt a significant blow as we kick off a new week, with traders waking up to the potential consequences of the Middle East conflict that only ever seems to deteriorate by the day,” Joshua Mahony, chief market analyst at Scope Markets, says.

“While much of the past week was spent hoping that this would be a short-term conflict that ultimately resolves with oil flowing globally once again, the weekend targeting of Iranian oil facilities spells out a new phase to the conflict that ultimately brings significant consequences for the long-term supply dynamic once the dust settles,” Mahony adds.

US futures also fell, with contracts on the S&P 500 and the tech-heavy Nasdaq 100 down 1.3% and 1.2%, respectively. Asian stocks, meanwhile, closed firmly in the red despite slightly moderating losses earlier in the session.

Energy Price Spike Continues

Major Middle Eastern energy producers including Kuwait, Iran and the UAE cut production amid ongoing strikes in the region, while Bahrain Petroleum Company (Bapco) became the region’s second producer after Qatar to declare force majeure.

Qatar’s energy minister told the FT last week that continued disruption to Gulf energy exports could drive oil prices to USD 150 a barrel within two to three weeks.

US President Donald Trump said Sunday, in a post on truth social, that increased oil prices were a “very small price to pay” for the destruction of Iran’s nuclear capabilities.

Brent crude oil prices jumped around 30% to nearly $120 per barrel in early Asian trading Monday, before moderating after Saudi Arabia reportedly offered 4.6 million barrels of crude via a pipeline to Yanbu on the Red Sea, according to Bloomberg. Brent crude was up 12.5% at $104 while WTI crude was up 12% at $102.

G7 finance ministers are now reportedly set to discuss a coordinated release of petroleum reserves later on Monday.

South Korea’s KOSPI benchmark on Monday triggered its second circuit breaker since the outbreak of the war, sparking a wider regional selloff, after a ruling party lawmaker warned that the country’s key chip industry was concerned about higher energy prices and supply disruptions hampering production of critical semiconductors. The index closed almost 6% lower, while Japanese peers in the Nikkei 225 declined 5.2%.

Indeed, surging energy prices are driving fears of a broader spike in inflation, which analysts warn could weigh on interest rates. Over the past week, traders have shifted their expectations away from cuts and toward likely hikes this year for the European Central Bank and the Bank of England.

“History suggests marked and persistent spikes in the price of crude can trigger persistent inflationary cycles,” Bank of America analysts write in a note. “The initial base case with oil prices around $15 higher than the pre-war level was not particularly concerning for inflation. But the most recent escalation leading oil prices to rise above $100 could become concerning if it proves persistent.”

US Equities Outperform

The US’s greater energy security has seen it fare better than its European and Asian peers from the recent global rout, with investors reversing a recent ex-US trade and piling into the dollar.

“The US dollar saw strong inflows as investors sold their European and Asian holdings – reversing the earlier rotation trade – and moved back into US dollar. The dollar has the advantage of naturally benefiting when energy prices rise, as most energy trade is denominated in dollars and rising energy prices increase the dollar demand, pushing its price higher,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says.

On Friday, the Morningstar Europe Index notched a weekly loss of more than 7% in dollar terms, its worst week since 2022.The Morningstar Asia Index closed the week down 5.2%, its worst weekly performance since the depths of the covid-19 pandemic selloff in March 2020. The Morningstar US Market Index, meanwhile, closed 2.2% lower for the week.

Looking ahead, ING’s global head of markets, Chris Turner, says markets would need to see a meaningful ratcheting down of the conflict, and the resumption of energy flows, for that trend to reverse in the near term.

“Investors will want to see some improvement on the ground – either via US/Israel taking sufficient military control to drastically reduce the Iran offensive, or some ceasefire news,” Turner, who is also ING’s regional head of research for UK & CEE, says.

“Otherwise, these trends — higher energy, bearish flattening of yield curves, lower equities, stronger dollar — will dominate.”